12 ms·

Cypriot Bailout Sends Shivers Throughout the Euro Zone

73 points by uvdiv 14y ago

uvdiv 14y ago
The government also extended a bank holiday that was put in place to try to stop a run on the banks. The holiday was supposed to end Monday night. Now, banks will not be opening their doors Tuesday, as planned. There was talk that they might not open Wednesday, either. [...] “As soon as banks in Cyprus reopen, people will rush to take all their money out, because they don’t believe this is a one-off deal,” he said. “When a bank run happens, the E.C.B. will have to pump in liquidity,” he added, “and what you will have is a shell of a banking system supported by E.C.B.-eligible Cyprus bonds, which will rocket the debt of Cyprus out of control.”
- samstave 14y ago
  There was a comment that a lot of russian mob money is held in Cyprus banks. I wonder if this is actually an attack on them in an effort to take the money from the russian mob. I also predict acts of vandalism on the banks. Where the goal is to cost the banks money to repair their facilities given the situation.
  - Lazare 14y ago
    Definitely not. The confiscation is 6.75% on small accounts (mostly EU savers and pensioners) who are covered by deposit insurance, and 9.9% on large accounts (yes, a lot of which is Russian money). Overall it will collect a total of around €6B. If you wanted to get €6B from just the accounts that aren't covered by deposit insurance you'd need to confiscate around 30%. So, basically, the EU had a choice of either taking 30% from the (mostly Russian) wealthy and 0% from the poor and middle class (a lot of whom are pensioners), or taking 9.9% and 6.75%, and they went with the latter. If anything, this entire debacle is an effort to protect Russian (and Cypriot) oligarchs at the expense of ordinary people. As a bonus, it also makes bank runs, the collapse of the EU financial system, and the destruction of the eurozone much more likely. Very odd.
    - samstave 14y ago
      Thanks for that info. What was the potential impact of doing nothing? As this action "makes the collapse of the EU financial system... much more likely" -- what would the impact have been to the EU financial system had nothing been done at all.
  - JumpCrisscross 14y ago
    10% is in the neighbourhood of cost-of-doing-business for a CIS corporate shell. The fact that there was so much pain inflicted on small accounts means someone has an eye out for the island's future as an offshore financial centre (read: Russian tax haven).
  - hippich 14y ago
    Regarding talks about russian mobs: there is indeed a lot of russian money in cyprus, but not all of it are from criminal activity. The way business works in post-USSR countries forces businessmen to never keep money in the country. And Cyprus banks happened to be most friendly with russian business.
mikecane 14y ago
They can't reopen the banks without limiting the amount of money people can withdraw. Thus the death spiral of the entire worldwide financial system begins.
- genwin 14y ago
  History will record that the grand collapse started with Cyprus.
- jk4930 14y ago
  No. We'll see some bank runs mostly in southern countries, but the deposits are power law distributed and thus the financial majority (in sum, not in numbers of accounts) will probably act more rational than members of the frightened, over-emotional masses that withdraw their 5-10K or so. The rational will transfer their accounts to more stable banks, e.g., in Germany and won't put their money under the mattress. Of course, it's a bit dirty to grab the money from those <100K too, it destroys trust, no question. But the essential players and movers were protected, that's why we created this small injustice (yes small, compared to what's possible).
  - mikecane 14y ago
    >>>The rational will transfer their accounts to more stable banks, e.g., in Germany Ah, so Cyprus will just collapse on its own then without any repercussions elsewhere? I don't think so.
    - jk4930 14y ago
      Cyprus won't collapse (and even if, that's not the end, they'll stand up again and as an EU member state they'll receive help as they did before). Their banking sector is overblown and the intention is to reduce it to EU average by 2018. They tried to copy Luxembourg, but screwed it up. Now they have to come up with something different. Anyway, that's far away from your "death spiral of the entire worldwide financial system." :)
      - 14y ago
chestnut-tree 14y ago
People across Europe will react with horror to this latest development in the Eurozone crisis. This will not strengthen the case for stronger European integration but turn many more against it. Notice too how the supporters of these measures attempt to frame the debate around wealthy foreign tax evaders while minimizing the plight of ordinary Cypriots. This extract from an opinion piece in The Guardian says it all "..the debt burden has been transferred from the banks, where it properly belongs, to households, who had no part in their lending decisions. As part of that propaganda campaign, the focus has been on Russian oligarchs and tax evaders who have been laundering funds through Cypriot banks. In fact, among those caught in the upper savings bracket are bound to be pensioners for whom this represents their entire life savings, and others who have recently borrowed enough money to buy a modest home. But even if only oligarchs were affected, this is surely an admission of guilt by the European and international authorities, who are responsible for the global regulation of banks and co-ordinating anti-money laundering activities. Their own failure can hardly be a justification for expropriating the small savers of Cyprus." http://www.guardian.co.uk/commentisfree/2013/mar/17/savers-horror-troika-raid-cyprus http://www.guardian.co.uk/commentisfree/2013/mar/17/savers-h...
- pavlov 14y ago
  Reading British newspapers for Eurozone financial commentary is like reading Soviet Pravda for its poignant analysis of American life. The rhetoric is so thick and the motivation so obvious that it's easy to forget that there's always someone who will take it seriously.
  - uvdiv 14y ago
    I think what most resembles Soviet-style propaganda is the public denouncement of Russian oligarchs as a pretext for collective punishment of Cypriot depositors.
- martinced 14y ago
  The problem is that even when people vote nationally against Europe, their corrupted lawyers/politicians still do only what they want: the french voted against entering the eurozone. Yet their leaders decided France would enter the eurozone. That's totally un-democratic just like what's happening in Cyprus is anti-democratic. Note that this shouldn't come as a surprise: Europe is mostly socialists and socialist only believe in democracy ("social democracy") as a mean to get in power and, once in power, to act in non-democratic ways. This is precisely what's happening: non-democratic confiscation of citizens' money to fund the state (please spare me the propaganda about the banks: it's about saving the european governments). (I digress but I so wish they weren't in it, because France is f^cked: people unwilling to work more than 32 hours/week, super high sense of entitlement, uncontrollable state debt exploding and they're going to default in a few years, just like Greece). I do really hope that the U.K. massively vote to get out of the European Union when the referendum shall take place. Of course they're wagging the dog with "rich russians" and whatnots: later on they'll blame the working people (who have economies) has being responsible of all the evil in Europe. Not a single time are you going to see socialists do some introspection. Greece, Spain, Portugal, Italy and France are all going to state default (Greece will indeed default again). Oh, and Cyprus shall never have a state debt of 100% of their GDP in 2020 as stated for this measure. There are way too many public servants, way too many state benefits, in all these countries for them to ever be able to repay their state debt. Socialism inevitably leads to state default and that's what we'll witness soon (we already witnessed it with Greece).
sausman 14y ago
It's an entire crony bankster program. Those who lent money to Cyprus’s banks by buying their debt rather than by depositing money at the banks, will suffer no losses at all. Those who lent money to the insolvent Cypriot government, will be paid off at 100 cents on the euro. In other words, the banksters are protected. Only depositors with banks will suffer losses in this International Monetary Fund engineered plan. It's as blatant example of who the IMF really works for. http://www.economicpolicyjournal.com/2013/03/what-to-keep-in-mind-about-tax-on.html http://www.economicpolicyjournal.com/2013/03/what-to-keep-in...
mixmax 14y ago
"After five years of bailouts financed largely by austerity-weary European taxpayers, wealthy nations like Germany and the Netherlands have decreed that from now on when a bank or country fails, it will be bond investors and perhaps even bank depositors who will be forced to pick up a big share of the bill." This is so incredibly stupid that it would be funny if it wasn't so tragic. They're basically telling everyone in the Eurozone that their money isn't safe in the bank, and that if you want to make sure it keeps being yours you should wthdraw it and move it to a safer place. Either under your mattress or outside of the Eurozone. They're basically asking for a bankrun across the southern European countries. Didn't any of these geniuses take econ 101?
- InclinedPlane 14y ago
  It's just another example of what's fundamentally wrong with the Euro. If you compare to the US, which is a continent sized country with a lot of diversity, you'll see some big differences. For one, the economic differences between regions in the US aren't nearly as large as in the eurozone. For another, the authority which regulates currency is also in control of taxation and government spending at a federal level, unlike the EU. Also, everyone in the US is subject to the same federal banking regulations and enjoys FDIC insured deposits. In the eurozone you have a hodgepodge with a currency system overlaid, and then when some financial crisis happens the whole system breaks down.
  - niggler 14y ago
    " the economic differences between regions in the US aren't nearly as large as in the eurozone" I think the origin of this and other problems is the lack of a significant EU-wide tax system. The US federal tax system serves as a wealth distribution mechanism (some states like NY and CA pay much more than they receive, and other states like OK receive much more than they pay). A similar system in europe would help the net import nations like Cyprus and greece.
    - InclinedPlane 14y ago
      This works in the US because there isn't actually that great a disparity between the wealthiest and poorest states in the US, whereas the disparity is much, much greater in the eurozone. More so, the "poor" states in the US are still pretty wealthy even compared to some of the wealthiest European countries, whereas the poor countries in the eurozone are quite poor on an absolute scale (Estonia and Slovakia have a per capita GDP of around 15k USD, much less than half the poorest US states). Also, the poorest eurozone countries are quite populous, there are tens of millions of people who are living at less than 3/4 of the mean per capita GDP of the eurozone, whereas in the US the same figure is around 2 million. It's a much, much harder situation to deal with and the eurozone has fewer options and tools to do so.
codesuela 14y ago
It would be pretty ironic if the Cyprus bailout of 2013 will noted in history books as the event that lead to the collapse of 21st century banking (next up bank runs). Is it probable? No. Is it possible? Maybe.
- adestefan 14y ago
  Here are your options: lose all of your money or lose 10% of your money. What do you choose?
  - codesuela 14y ago
    Option 1: Make rational decisions and rely on everybody else being rational Option 2: Panic and make rash decisions
    - GHFigs 14y ago
      Relying on everybody else being rational is irrational.
      - codesuela 14y ago
        I guess that boils it down to one option :)
        cpeterso 14y ago
        Option 3: Make rational decisions and rely on everybody else panicking? :)
    - deleted 14y ago
      [deleted]
  - jan_g 14y ago
    I also think that there are two clear options: Cyprus gets a bailout under ECB terms or Cyprus doesn't get a bailout and faces insolvency. It seems that the government decided that the first option is preferable to the second one. The second option would almost certainly lead to civil unrest, because it would probably mean that teachers, doctors and other public employees (also pensioners) wouldn't get payed next month. Of course, the first option might also lead to civil unrest ...
brador 14y ago
How safe are bank deposits in northern coutries? Germany, uk?
- adestefan 14y ago
  This is only happening because the government of Cyprus doesn't have the money to do it. As for other countries they're as safe as their "full faith and credit" and any depository insurance that it covers.
- Turing_Machine 14y ago
  The UK isn't on the Euro, so they won't be impacted directly. Panics have a way of spreading, though.
piyusht 14y ago
Taxing those who are saving rather than the ones who are earning more. Call it a case of misaligned incentives. And what about the long term implication on the banking system? How far it will limit the effect of central bank to control inflation now since people will think twice before putting money in bank account? Would love to see some macroeconomics views on this.
bitcartel 14y ago
The banks are supposed to open on Tuesday. Extending the bank holiday and blocking international transfers is most likely a violation of the EU treaty which guarantees free movement of capital. http://ec.europa.eu/internal_market/capital/framework/treaty/index_en.htm http://ec.europa.eu/internal_market/capital/framework/treaty...
hippich 14y ago
From fbme.com (large bank in Cyprus): 16 Mar 13 2.00pm 17 March 2013 The authorities in Cyprus have announced the delay of a Parliamentary debate on the provisional agreement signed by European Union finance ministers for a bailout package for the Government of Cyprus. Though there is considerable media speculation on the detail, some of it no doubt unfounded, the Cyprus authorities have yet to confirm arrangements within the agreed package and the implications for the banking industry and its customers. These are under discussion at the present time.   FBME Bank is in close contact with the authorities in Cyprus and is monitoring the situation with regard to Parliamentary and Regulatory Authority discussions. We will keep our customers informed as to developments and expect to update this statement each day in the coming period as soon as information becomes available. Please refer to our website www.fbme.com for the latest statement, which we expect to update during the course of Monday, 18 March 2013 and thereafter. At this moment, we wish to assure all our customers that the financial condition of FBME Bank is sound and depositors’ monies benefit from the strength of the Bank’s dynamic and well diversified Balance Sheet, which at all times meets European Capital Adequacy and Liquidity Standards. It continues to be the Bank’s intention to keep a very high liquidity and strong solvency position. If there is further information required please email pr@fbme.com
- Turing_Machine 14y ago
  "The more he spoke of his honor, the faster we counted our spoons." -- Ralph Waldo Emerson
brisance 14y ago
Couldn't the large account holders just split the large accounts into smaller ones and just save themselves the 3.15% margin? Even taking transaction fees into account, it would still be a lot.
martinced 14y ago
There's something worse that lawyers who can't count. Lawyers who think they can. The problem is that politician dream up of an european union to make sure no more french / german war would happen. But politicians can't count: they're for the most part lawyers. So they build this monstrosity: the European Union. A mad bureaucracy / technocracy where every document is translated in 27 languages (including obscure ones): small countries love it because they can send people to get jobs in Brussels at crazy high salaries. For what? Paperwork. Nothing but paperwork. Then they dreamed up the most stupid thing ever: a common currency (the euro) without a common fiscality. Only stupid lawyers can come up with nonsense like this. Economists did warn them, before the first euro even circulated, that it would end up in precisely the current situation (even the default of Greece and Spain had been forecast). Nobody listened. Wanna know what's coming next? It's easy: go read what economists who predicted the current situation are saying. They're from the Milton Friedman school of economics thought. Keynesians lost is and lost it a long time ago. Nothing to learn there: they never predicted anything more than a few years (two or three) before it happened. If you want to predict 15 years+ ahead you have to read Friedman and its disciples. What coming next is simple: these stupid politicians and lawyers who created all this crazy paperwork and non-sense laws are going to try anything they can, including more and more non-democratic measures, to try to save the euro. But they can't save it: it's fundamentally flawed. Countries have to get out or the entire eurozone is going to split and go back to national currencies. The cost is going to be about 15% of the GDP for all the countries exiting. If the euro ain't split in the few years coming we'll be going to have the BCE defaulting (the BCE basically already became a bad bank, drowning under state debt from states who are going to default) and massive civil unrest: people losing everything. Here we're talking about a worldwide GDP drop of about 30%. So either we bit the bullet now and take about a 15% GDP loss by going to national currencies or we try desperately to save the euro and we'll end up creating a much bigger problem. We're witnessing history. We're seeing a bunch of clueless politicians (who are mostly lawyers) totally f^cking up the entire economy of a continent (and probably of the entire world).
fernly 14y ago
Forget the lawyer-talk and economist-talk. To 90% of all depositors, they have a simple contract with the bank: I give you my money and you can use it to make more money (loaning it out at interest, etc) on one condition: you keep it absolutely safe and give it back when I ask. That's it, that's the deal as far as almost all depositors care. And if they think for one microsecond that the bank might welch on the deal, they want out, now. Not tomorrow, n.o.w. This is an brazen raid on personal deposits: a new, unexpected tax on funds people thought had already been through taxation and were safe. People will hate it. And they'll see the banks as both having breached their understood contract and being the cause of an unfair tax. If the government puts in rules restricting withdrawals, they'll just take it out at whatever rate is allowed and send it elsewhere, or invest it in tangibles like gold or gems and put those in private lockboxes. The net result over the next year will be a steady flight of small-investor capital out of every country that is even slightly suspected of this scam. A lot of it will just disappear from the economy. This will depress those economies for years if not decades.

73 points by uvdiv 14y ago

uvdiv 14y ago

The government also extended a bank holiday that was put in place to try to stop a run on the banks. The holiday was supposed to end Monday night. Now, banks will not be opening their doors Tuesday, as planned. There was talk that they might not open Wednesday, either. [...] “As soon as banks in Cyprus reopen, people will rush to take all their money out, because they don’t believe this is a one-off deal,” he said. “When a bank run happens, the E.C.B. will have to pump in liquidity,” he added, “and what you will have is a shell of a banking system supported by E.C.B.-eligible Cyprus bonds, which will rocket the debt of Cyprus out of control.”

samstave 14y ago
There was a comment that a lot of russian mob money is held in Cyprus banks. I wonder if this is actually an attack on them in an effort to take the money from the russian mob. I also predict acts of vandalism on the banks. Where the goal is to cost the banks money to repair their facilities given the situation.
- Lazare 14y ago
  Definitely not. The confiscation is 6.75% on small accounts (mostly EU savers and pensioners) who are covered by deposit insurance, and 9.9% on large accounts (yes, a lot of which is Russian money). Overall it will collect a total of around €6B. If you wanted to get €6B from just the accounts that aren't covered by deposit insurance you'd need to confiscate around 30%. So, basically, the EU had a choice of either taking 30% from the (mostly Russian) wealthy and 0% from the poor and middle class (a lot of whom are pensioners), or taking 9.9% and 6.75%, and they went with the latter. If anything, this entire debacle is an effort to protect Russian (and Cypriot) oligarchs at the expense of ordinary people. As a bonus, it also makes bank runs, the collapse of the EU financial system, and the destruction of the eurozone much more likely. Very odd.
  - samstave 14y ago
    Thanks for that info. What was the potential impact of doing nothing? As this action "makes the collapse of the EU financial system... much more likely" -- what would the impact have been to the EU financial system had nothing been done at all.
- JumpCrisscross 14y ago
  10% is in the neighbourhood of cost-of-doing-business for a CIS corporate shell. The fact that there was so much pain inflicted on small accounts means someone has an eye out for the island's future as an offshore financial centre (read: Russian tax haven).
- hippich 14y ago
  Regarding talks about russian mobs: there is indeed a lot of russian money in cyprus, but not all of it are from criminal activity. The way business works in post-USSR countries forces businessmen to never keep money in the country. And Cyprus banks happened to be most friendly with russian business.

mikecane 14y ago

They can't reopen the banks without limiting the amount of money people can withdraw. Thus the death spiral of the entire worldwide financial system begins.

genwin 14y ago
History will record that the grand collapse started with Cyprus.
jk4930 14y ago
No. We'll see some bank runs mostly in southern countries, but the deposits are power law distributed and thus the financial majority (in sum, not in numbers of accounts) will probably act more rational than members of the frightened, over-emotional masses that withdraw their 5-10K or so. The rational will transfer their accounts to more stable banks, e.g., in Germany and won't put their money under the mattress. Of course, it's a bit dirty to grab the money from those <100K too, it destroys trust, no question. But the essential players and movers were protected, that's why we created this small injustice (yes small, compared to what's possible).
- mikecane 14y ago
  >>>The rational will transfer their accounts to more stable banks, e.g., in Germany Ah, so Cyprus will just collapse on its own then without any repercussions elsewhere? I don't think so.
  - jk4930 14y ago
    Cyprus won't collapse (and even if, that's not the end, they'll stand up again and as an EU member state they'll receive help as they did before). Their banking sector is overblown and the intention is to reduce it to EU average by 2018. They tried to copy Luxembourg, but screwed it up. Now they have to come up with something different. Anyway, that's far away from your "death spiral of the entire worldwide financial system." :)
    - 14y ago

chestnut-tree 14y ago

People across Europe will react with horror to this latest development in the Eurozone crisis. This will not strengthen the case for stronger European integration but turn many more against it. Notice too how the supporters of these measures attempt to frame the debate around wealthy foreign tax evaders while minimizing the plight of ordinary Cypriots. This extract from an opinion piece in The Guardian says it all "..the debt burden has been transferred from the banks, where it properly belongs, to households, who had no part in their lending decisions. As part of that propaganda campaign, the focus has been on Russian oligarchs and tax evaders who have been laundering funds through Cypriot banks. In fact, among those caught in the upper savings bracket are bound to be pensioners for whom this represents their entire life savings, and others who have recently borrowed enough money to buy a modest home. But even if only oligarchs were affected, this is surely an admission of guilt by the European and international authorities, who are responsible for the global regulation of banks and co-ordinating anti-money laundering activities. Their own failure can hardly be a justification for expropriating the small savers of Cyprus." http://www.guardian.co.uk/commentisfree/2013/mar/17/savers-horror-troika-raid-cyprus http://www.guardian.co.uk/commentisfree/2013/mar/17/savers-h...

pavlov 14y ago
Reading British newspapers for Eurozone financial commentary is like reading Soviet Pravda for its poignant analysis of American life. The rhetoric is so thick and the motivation so obvious that it's easy to forget that there's always someone who will take it seriously.
- uvdiv 14y ago
  I think what most resembles Soviet-style propaganda is the public denouncement of Russian oligarchs as a pretext for collective punishment of Cypriot depositors.
martinced 14y ago
The problem is that even when people vote nationally against Europe, their corrupted lawyers/politicians still do only what they want: the french voted against entering the eurozone. Yet their leaders decided France would enter the eurozone. That's totally un-democratic just like what's happening in Cyprus is anti-democratic. Note that this shouldn't come as a surprise: Europe is mostly socialists and socialist only believe in democracy ("social democracy") as a mean to get in power and, once in power, to act in non-democratic ways. This is precisely what's happening: non-democratic confiscation of citizens' money to fund the state (please spare me the propaganda about the banks: it's about saving the european governments). (I digress but I so wish they weren't in it, because France is f^cked: people unwilling to work more than 32 hours/week, super high sense of entitlement, uncontrollable state debt exploding and they're going to default in a few years, just like Greece). I do really hope that the U.K. massively vote to get out of the European Union when the referendum shall take place. Of course they're wagging the dog with "rich russians" and whatnots: later on they'll blame the working people (who have economies) has being responsible of all the evil in Europe. Not a single time are you going to see socialists do some introspection. Greece, Spain, Portugal, Italy and France are all going to state default (Greece will indeed default again). Oh, and Cyprus shall never have a state debt of 100% of their GDP in 2020 as stated for this measure. There are way too many public servants, way too many state benefits, in all these countries for them to ever be able to repay their state debt. Socialism inevitably leads to state default and that's what we'll witness soon (we already witnessed it with Greece).

sausman 14y ago

It's an entire crony bankster program. Those who lent money to Cyprus’s banks by buying their debt rather than by depositing money at the banks, will suffer no losses at all. Those who lent money to the insolvent Cypriot government, will be paid off at 100 cents on the euro. In other words, the banksters are protected. Only depositors with banks will suffer losses in this International Monetary Fund engineered plan. It's as blatant example of who the IMF really works for. http://www.economicpolicyjournal.com/2013/03/what-to-keep-in-mind-about-tax-on.html http://www.economicpolicyjournal.com/2013/03/what-to-keep-in...

mixmax 14y ago

"After five years of bailouts financed largely by austerity-weary European taxpayers, wealthy nations like Germany and the Netherlands have decreed that from now on when a bank or country fails, it will be bond investors and perhaps even bank depositors who will be forced to pick up a big share of the bill." This is so incredibly stupid that it would be funny if it wasn't so tragic. They're basically telling everyone in the Eurozone that their money isn't safe in the bank, and that if you want to make sure it keeps being yours you should wthdraw it and move it to a safer place. Either under your mattress or outside of the Eurozone. They're basically asking for a bankrun across the southern European countries. Didn't any of these geniuses take econ 101?

InclinedPlane 14y ago
It's just another example of what's fundamentally wrong with the Euro. If you compare to the US, which is a continent sized country with a lot of diversity, you'll see some big differences. For one, the economic differences between regions in the US aren't nearly as large as in the eurozone. For another, the authority which regulates currency is also in control of taxation and government spending at a federal level, unlike the EU. Also, everyone in the US is subject to the same federal banking regulations and enjoys FDIC insured deposits. In the eurozone you have a hodgepodge with a currency system overlaid, and then when some financial crisis happens the whole system breaks down.
- niggler 14y ago
  " the economic differences between regions in the US aren't nearly as large as in the eurozone" I think the origin of this and other problems is the lack of a significant EU-wide tax system. The US federal tax system serves as a wealth distribution mechanism (some states like NY and CA pay much more than they receive, and other states like OK receive much more than they pay). A similar system in europe would help the net import nations like Cyprus and greece.
  - InclinedPlane 14y ago
    This works in the US because there isn't actually that great a disparity between the wealthiest and poorest states in the US, whereas the disparity is much, much greater in the eurozone. More so, the "poor" states in the US are still pretty wealthy even compared to some of the wealthiest European countries, whereas the poor countries in the eurozone are quite poor on an absolute scale (Estonia and Slovakia have a per capita GDP of around 15k USD, much less than half the poorest US states). Also, the poorest eurozone countries are quite populous, there are tens of millions of people who are living at less than 3/4 of the mean per capita GDP of the eurozone, whereas in the US the same figure is around 2 million. It's a much, much harder situation to deal with and the eurozone has fewer options and tools to do so.

codesuela 14y ago

It would be pretty ironic if the Cyprus bailout of 2013 will noted in history books as the event that lead to the collapse of 21st century banking (next up bank runs). Is it probable? No. Is it possible? Maybe.

adestefan 14y ago
Here are your options: lose all of your money or lose 10% of your money. What do you choose?
- codesuela 14y ago
  Option 1: Make rational decisions and rely on everybody else being rational Option 2: Panic and make rash decisions
  - GHFigs 14y ago
    Relying on everybody else being rational is irrational.
    - codesuela 14y ago
      I guess that boils it down to one option :)
      - cpeterso 14y ago
        Option 3: Make rational decisions and rely on everybody else panicking? :)
  - deleted 14y ago
    [deleted]
- jan_g 14y ago
  I also think that there are two clear options: Cyprus gets a bailout under ECB terms or Cyprus doesn't get a bailout and faces insolvency. It seems that the government decided that the first option is preferable to the second one. The second option would almost certainly lead to civil unrest, because it would probably mean that teachers, doctors and other public employees (also pensioners) wouldn't get payed next month. Of course, the first option might also lead to civil unrest ...

brador 14y ago

How safe are bank deposits in northern coutries? Germany, uk?

adestefan 14y ago
This is only happening because the government of Cyprus doesn't have the money to do it. As for other countries they're as safe as their "full faith and credit" and any depository insurance that it covers.
Turing_Machine 14y ago
The UK isn't on the Euro, so they won't be impacted directly. Panics have a way of spreading, though.

piyusht 14y ago

Taxing those who are saving rather than the ones who are earning more. Call it a case of misaligned incentives. And what about the long term implication on the banking system? How far it will limit the effect of central bank to control inflation now since people will think twice before putting money in bank account? Would love to see some macroeconomics views on this.

bitcartel 14y ago

The banks are supposed to open on Tuesday. Extending the bank holiday and blocking international transfers is most likely a violation of the EU treaty which guarantees free movement of capital. http://ec.europa.eu/internal_market/capital/framework/treaty/index_en.htm http://ec.europa.eu/internal_market/capital/framework/treaty...

hippich 14y ago

From fbme.com (large bank in Cyprus): 16 Mar 13 2.00pm 17 March 2013 The authorities in Cyprus have announced the delay of a Parliamentary debate on the provisional agreement signed by European Union finance ministers for a bailout package for the Government of Cyprus. Though there is considerable media speculation on the detail, some of it no doubt unfounded, the Cyprus authorities have yet to confirm arrangements within the agreed package and the implications for the banking industry and its customers. These are under discussion at the present time.   FBME Bank is in close contact with the authorities in Cyprus and is monitoring the situation with regard to Parliamentary and Regulatory Authority discussions. We will keep our customers informed as to developments and expect to update this statement each day in the coming period as soon as information becomes available. Please refer to our website www.fbme.com for the latest statement, which we expect to update during the course of Monday, 18 March 2013 and thereafter. At this moment, we wish to assure all our customers that the financial condition of FBME Bank is sound and depositors’ monies benefit from the strength of the Bank’s dynamic and well diversified Balance Sheet, which at all times meets European Capital Adequacy and Liquidity Standards. It continues to be the Bank’s intention to keep a very high liquidity and strong solvency position. If there is further information required please email pr@fbme.com

Turing_Machine 14y ago
"The more he spoke of his honor, the faster we counted our spoons." -- Ralph Waldo Emerson

brisance 14y ago

Couldn't the large account holders just split the large accounts into smaller ones and just save themselves the 3.15% margin? Even taking transaction fees into account, it would still be a lot.

martinced 14y ago

There's something worse that lawyers who can't count. Lawyers who think they can. The problem is that politician dream up of an european union to make sure no more french / german war would happen. But politicians can't count: they're for the most part lawyers. So they build this monstrosity: the European Union. A mad bureaucracy / technocracy where every document is translated in 27 languages (including obscure ones): small countries love it because they can send people to get jobs in Brussels at crazy high salaries. For what? Paperwork. Nothing but paperwork. Then they dreamed up the most stupid thing ever: a common currency (the euro) without a common fiscality. Only stupid lawyers can come up with nonsense like this. Economists did warn them, before the first euro even circulated, that it would end up in precisely the current situation (even the default of Greece and Spain had been forecast). Nobody listened. Wanna know what's coming next? It's easy: go read what economists who predicted the current situation are saying. They're from the Milton Friedman school of economics thought. Keynesians lost is and lost it a long time ago. Nothing to learn there: they never predicted anything more than a few years (two or three) before it happened. If you want to predict 15 years+ ahead you have to read Friedman and its disciples. What coming next is simple: these stupid politicians and lawyers who created all this crazy paperwork and non-sense laws are going to try anything they can, including more and more non-democratic measures, to try to save the euro. But they can't save it: it's fundamentally flawed. Countries have to get out or the entire eurozone is going to split and go back to national currencies. The cost is going to be about 15% of the GDP for all the countries exiting. If the euro ain't split in the few years coming we'll be going to have the BCE defaulting (the BCE basically already became a bad bank, drowning under state debt from states who are going to default) and massive civil unrest: people losing everything. Here we're talking about a worldwide GDP drop of about 30%. So either we bit the bullet now and take about a 15% GDP loss by going to national currencies or we try desperately to save the euro and we'll end up creating a much bigger problem. We're witnessing history. We're seeing a bunch of clueless politicians (who are mostly lawyers) totally f^cking up the entire economy of a continent (and probably of the entire world).

fernly 14y ago

Forget the lawyer-talk and economist-talk. To 90% of all depositors, they have a simple contract with the bank: I give you my money and you can use it to make more money (loaning it out at interest, etc) on one condition: you keep it absolutely safe and give it back when I ask. That's it, that's the deal as far as almost all depositors care. And if they think for one microsecond that the bank might welch on the deal, they want out, now. Not tomorrow, n.o.w. This is an brazen raid on personal deposits: a new, unexpected tax on funds people thought had already been through taxation and were safe. People will hate it. And they'll see the banks as both having breached their understood contract and being the cause of an unfair tax. If the government puts in rules restricting withdrawals, they'll just take it out at whatever rate is allowed and send it elsewhere, or invest it in tangibles like gold or gems and put those in private lockboxes. The net result over the next year will be a steady flight of small-investor capital out of every country that is even slightly suspected of this scam. A lot of it will just disappear from the economy. This will depress those economies for years if not decades.